Tax break negotiations stall on Capitol Hill

Neither Republicans nor Democrats are quite ready to budge in negotiations over a slew of expired tax breaks, lawmakers and aides said last week.

Both sides want to wrap up talks soon over the so-called tax extenders, the dozens of expired tax breaks whose restoration has lately become something of a Christmas time tradition every two years.

{mosads}But with almost three weeks left before lawmakers want to break for the year, House GOP tax writers are still pushing to get as many business-friendly incentives – like those for research and expensing – extended without an expiration date, as they can.

If a deal between the two chambers can’t be reached, House Republicans are saying the best they might be able to do is extend tax breaks that expired at the end of 2013 only through the end of this year. That would force lawmakers to grapple with the preferences again in 2015, when Republicans will have both control of the Senate and a bigger majority in the House.

In the Senate, Democrats aren’t rejecting that approach out of hand, but are also putting the idea of indefinitely extending tax breaks for working families into negotiations.

Tax writers in both parties also say they continue to favor the Finance Committee’s proposal to extend most of the incentives, which expired at the end of 2013, through the end of next year. And Finance Chairman Ron Wyden (D-Ore.) is even tossing out the unlikely idea of attaching a permanent solution to the so-called Medicare “doc fix” to an extenders package, lobbyists and aides say.

“This is the art of the doable around here,” said Sen. Orrin Hatch (Utah), the top Republican on the Finance Committee. “I think a lot depends on the House and what they want to do. Right now, it’s still in flux.”

House GOP leaders have said they hope to wrap up the current lame-duck session by Dec. 11, the day the current stopgap spending measure expires. The IRS has already warned that the 2015 filing season could be delayed if an extenders deal isn’t reached quickly. 

Leaders in both chambers and both parties are likely to play a larger role in negotiations before a final deal is reached. But some aides on Capitol Hill believe a final deal could even be struck before lawmakers return to Washington in December, even as other staffers caution that it’s still early in the process.

House Republicans have voted to revive incentives like the credit for business research, and a couple of provisions that allow businesses to more quickly write off purchases for the long-term, with varying degrees of Democratic support.

 “The longer, the better,” Rep. Pat Tiberi (Ohio), a senior Republican on the House Ways and Means Committee, said recently. “When you’re looking at job creation, when you’re looking at job growth, longer-term certainty is preferable.”

Many Republicans also want to keep some provisions – most notably, the production tax credit prized by the wind industry – from getting restored. Conservative groups like Americans for Prosperity, which has ties to the billionaire industrialist Koch Brothers, are pushing to kill the wind credit, but the incentive does have the strong support of some Republicans, including Sen. Chuck Grassley (Iowa). 

House GOP tax writers like Tiberi have also said they think it’s a mistake to only extend provisions through the end of 2014.

“There’s just a real good case to be made for certainty as much as we can,” Tiberi said. “But listen, I understand the complexity of these negotiations.”

Both Hatch and Wyden have said that, at the very least, the two-year deal struck by the Finance Committee should be the starting point for extender negotiations.

“If I had my way, I’d keep the Senate bill the way it is,” Hatch told reporters. “It was a classic compromise. There are things that everybody likes in it, and things that both sides don’t like.”

 Democrats have said that, if provisions are to be put into place indefinitely, they would want to see expansions of the Earned Income Tax Credit and the child tax credit that are set to expire in 2017 extended for the long haul. Democrats are also big fans of the American Opportunity Tax Credit, which helps families with college expenses.

But at least one Democratic aide said that a one-year deal was preferable to giving in on allowing too many GOP priorities to be restored indefinitely.

Some K Street operatives have said they’re concerned about the increasing amount of chatter about a one-year deal, if the House GOP draws a hard line on extending some incentives for good. But some lobbyists have also speculated that the incoming Senate majority leader, Mitch McConnell (R-Ky.) would prefer a longer deal so the Senate doesn’t have to deal with the lapsed tax breaks again next year. 

One Senate aide said a one-year deal is “not going to happen, period” in the upper chamber.

“I just don’t understand how Republicans, the party of business, continues to inject this uncertainty into the economy so investors can’t make a determination,” said Sen. Sherrod Brown (D-Ohio), a member of the Finance Committee.